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Faculty of Economics

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Corsetti, G., Duarte, J. B. and Mann, S.

One Money, Many Markets

Journal of the European Economic Association

Vol. 20(1) pp. 513–548 (2021)

Abstract: We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the response of output and private consumption.

Keywords: Monetary Policy, High-Frequency Identification, Monetary Union, Housing Market, Loan-to-value Ratio, Adjustable Mortgage Rates

JEL Codes: E21, E31, E44, E52, F44, F45

Author links: Giancarlo Corsetti  

Publisher's Link: https://doi.org/10.1093/jeea/jvab030

Keynes Fund Project(s):
Monetary Policy, Housing and Consumption in the Euro Area (JHOH)  



Cambridge Working Paper in Economics Version of Paper: One Money, Many Markets - A Factor Model Approach to Monetary Policy in the Euro Area with High-Frequency Identification, Corsetti, G., Duarte, J. B. and Mann, S., (2018)

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